Working Holiday Makers

A: On 28 November 2016, the Treasurer announced tax rate changes for foreign residents who are on working holidays in Australia. The first $37,000 will be taxed at 15%. The usual marginal tax rate will apply for income over $37,000. They will no longer be entitled to claim the tax free threshold.

A: From 1 January 2017, a working holiday maker can now stay with the employer for the full 12 months (this was previously 6 months) so long as the second 6 months is at a different location.

Q: What aboutTax File Number Declarations?

For employees that started work before 1 January 2017

There is no need to give them a new TFN declaration (as you will have received a TFN when the employee started). You will need to confirm their visa subclass to ensure you tax them correctly.

For employees that start work after 1 January 2017

The TFN Declaration has not changed as yet. Until this is created by the ATO, you will need to check the visa status of all new employees using VEVO.

If a TFN has not been provided

You must withhold 47% from payments to a working holiday maker (ignoring cents), if:

They have not quoted their TFN

They have not claimed an exemption from quoting their TFN

They have not advised you that they have applied for a TFN or have made an enquiry with us.

If the employee has not given you their TFN within 28 days, you must withhold 47% from any payment you make unless we tell you not to.

Q: What happens if I am unregistered?

A: If you don't register, you must use the foreign resident withholding rates which start at 32.5% for the first $37,000. Penalties apply if you employ a working holiday maker with visa subclass 417 or 462 and you don't register as an employer of working holiday makers.

Q: How does this affect the PAYG Payment Summaries?

Only income earned from 1 January 2017 is subject to the working holiday maker tax rates. You will need a separate payment summary for any income from 1 July 2016 to 31 December 2016.

This will affect employees that started before 1 January 2017 as they will receive two PAYG Payment Summaries at the end of 2016/17 financial year.

This means you need to start a new employee record for any qualifying employee as at 1 January.

Q: When it comes to a working holiday maker being able to stay the second 6 months with the one employer, what is a different location?

The Department of Immigration has advised that a different location is clearly another state and if not another state, it must be a different end user (a different service to a different set of individuals).

With this being very new legislation and no comprehensive description easily available yet, we recommend you check with an employment law expert that has an understanding of Commonwealth Law.

Q: How do I tax a termination for a working Holiday Visa Maker?

As the Australian Working Holiday Programme (2017) (Backpacker Tax) is only applicable to salary and wages, termination payments are to be applied as normal.